Japan faces potential currency crisis as oil prices and fiscal expansion threaten yen stability, strategists say.
Japan’s yen stands on the edge of a historic collapse due to sustained oil price pressures and fiscal loosening, according to SMBC Nikko Securities strategist Makoto Noji. The warning follows three years of cost-push inflation that has strained households, with further demand stimulus risking accelerated price growth.
Noji urged a combination of yen-buying intervention, Bank of Japan rate hikes, and a halt to fiscal expansion, arguing no single measure would suffice. Finance Minister Katayama indicated the government would act in currency markets if necessary, though domestic policy remains the only lever amid external oil shocks.
The strategist emphasized that fiscal concessions to ease living costs could exacerbate inflation, complicating Japan’s policy response. The yen’s vulnerability stems from its inability to counter geopolitical risks, such as disruptions in the Hormuz Strait.